The successful bidders for Google shares won't be the only ones watching eagerly to see how much the IPO excites the stock market. Dozens of dot-com companies are hoping that Google's initial public offering marks a reawakening of all things Internet.
In the months since Google announced it would sell stock to the public, more than 150 companies have said they plan IPOs, despite the rocky economy and slumping stock market. Others, with names like Kelkoo SA and Advertising.com Inc., are opting to sell themselves to bigger companies offering huge wads of cash.
Like a flashback to 1999, a Boston man recently pocketed $2.75 million for selling rights to a Web address -- www.creditcards.com -- to a company called Click Success LP. IPO shares in Internet software pioneer Salesforce.com Inc. soared 56 percent on the first day of trading.
Although Google and Salesforce.com report healthy profit, the list of money-losing technology companies hoping to ride Google's coattails is quite long. PlanetOut Inc., a Web service for gays; ZipRealty Inc., an online real estate service; WebSideStory Inc., a site traffic analyst; and SmartBargains Inc., an Internet liquidator, are among the nearly two dozen Internet businesses that have never had a profitable year but nevertheless have filed with the Securities and Exchange Commission to sell shares to the public.
"It's buyer beware," said Sal Morrealle, an analyst for the brokerage firm Cantor Fitzgerald LP in Los Angeles.
Peter S. Fader, a professor at the Wharton School of the University of Pennsylvania, said some companies treat their IPOs more like a marketing opportunity than a capital-raising exercise. Buying these stocks "is no different than betting on what the temperature is going to be in Tuscaloosa tomorrow," he said.
The flood of activity comes partly from venture capitalists stirring again, including those trying to recoup a portion of the billions of dollars they lost when the Internet bubble burst in 2000, analysts say. Many used their remaining money to nurse Web survivors during the past four years, when investors largely shunned Internet stocks, and now they are pushing to take those companies public. They're making plenty of new bets, too. Venture funds spent $10.6 billion in new investments in the first six months of this year, up from $8.9 billion over the same period last year.
Investors are "picking up the rubble of the dot-bomb and putting some good pieces back together," said Crawford Del Prete, senior vice president for research at IDC, a technology research firm.
Some venture investors have been able to cash out as bigger companies line up to buy the smaller companies they had backed.
Just in the past few weeks, South Korea's top Web site operator, Daum Communications Corp., said it would fork over $95 million to acquire the American Web sites of Terra Lycos SA. Viacom Inc. vowed to pay $46 million for the part of Sportsline.com it did not already own. International Business Machines Corp. bought software maker Cyanea Systems Corp., and America Online Inc. bought anti-spam vendor Mailblocks Inc.
In one of this year's biggest Internet takeovers, Yahoo paid $579 million in cash for Kelkoo, a comparison-shopping Web site based in Paris. And America Online plunked down $435 million to buy Baltimore-based Advertising.com, which had filed for a stock offering.
The IPO market also started the year strong, though it has cooled markedly in the past few weeks. So far this year, 146 U.S. companies have sold initial shares to the public, more than the total for all of 2003, according to Thomson Financial. Although 200 more have registered to sell shares, at least 11 companies recently pulled back from those plans, citing the lousy stock market. The tech-heavy Nasdaq composite index is off 10 percent for the year.
Most of the companies that have launched IPOs this year are small but sturdy companies created before the market crash in 2001. "These are companies with good revenue curves and profitability as a general rule," said David Menlow, president of IPO Financial Network, which analyzes public offerings.
But, he said, "that doesn't mean that a couple of deals cannot ride on the coattails."
WPT Enterprises Inc., a reality TV company that produces sports-style coverage of poker games, sold its first shares to the public last week even though it is just two years old, has 10 employees and lost almost $500,000 last year. Company officials declined to comment.
Another money-losing company aiming to go public is Odimo Inc., an online jewelry vendor run by a married couple whose previous job was producing infomercials for psychic hotlines.
Andrew Miller, the Boston entrepreneur whose company, Deal Jam LLC, recently sold the Creditcards.com name to Click Success, is hoping the Odimo IPO comes off. That's because in 2000 he sold the Web address www.diamond.com to Sunrise, Fla.-based Odimo for some cash and shares of the company.
"They were six days from an IPO when we sold the name to them," Miller said. Odimo pulled the earlier offering when the market went south; Miller has been sitting on his shares ever since.
Odimo sells high-end watches, handbags and diamonds from its Web sites, including Diamond.com, Ashford.com and WorldofWatches.com. Industry analysts estimate the market for luxury goods sold online is $2 billion a year. Still, Odimo lost $11.6 million in 2003 on sales of $41.7 million.
That is not the only item in Odimo's regulatory filings to raise eyebrows. Among the risks Odimo disclosed was that it may "inadvertently sell counterfeit or stolen goods" because it acquires most of its watches and luxury goods through the gray market, rather than from manufacturers or authorized distributors. Handbag designer Prada SA sued the company in March, accusing it of selling counterfeit wares.
Odimo officials declined to comment.
For some, not even Google's coattails are enough to ensure a successful public debut. One that cut and ran last week was MatchNet PLC, a money-losing Internet dating service that withdrew its IPO filing and announced that its chief executive had quit.
The company had already disclosed that it faced management challenges. The departing chief executive took over only a few months ago, and the company has no chief financial officer, controller or general counsel.
Based in Beverley Hills, MatchNet runs online dating services, including AmericanSingles.com, a general matchmaking site, and JDate.com, for Jewish people. Like many start-ups, it lays claim to a huge market: the 86 million single adults "who are looking to meet a companion," it told the SEC. But so far, MatchNet has signed up only 235,000 as paying subscribers.
At least another dozen money-losing technology companies have filed to go public. They include District-based InPhonic Inc., which lost $44.3 million last year selling wireless services over the Internet; Seven Networks Inc. of Redwood City, Calif., which lost $12.9 million selling software to cell phone carriers; PortalPlayer Inc. of Santa Clara, Calif., which lost $8 million selling electronics that run portable music players; and Jamdat Mobile Inc., which lost $7.1 million making bowling games and other entertainment for cell phones.
Del Prete of IDC said today's IPO market is more rational than the "intoxicating" one of the 1990s. Companies like Jamdat are salvaging valid ideas that emerged from the boom, using technologies that have matured, he said.
Richard J. Peterson, chief strategist at Thomson Financial, which tracks IPO data, was more circumspect. "IPOs always have a high mortality rate," he said. "That is why there are all those warnings."
Staff researcher Richard Drezen contributed to this report.